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Adverse selection in sports betting

Adverse selection in sports betting
In order to have winning bets, it is important to understand the adverse selection.
by Academia   |   comments 0

When the term adverse selection is used in a negotiation, whatever it may be, it means that one of the parties involved has more information about the product / service than the other interested party. Consequently, the party that has less control of the negotiation ends up making decisions that are often wrong, affecting not only themselves, but the entire market. In sports betting it is quite common to analyze cases like this, as this asymmetry of information is included when it comes to analyzing the probabilities that bookmakers are offering.

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In the vast majority of cases, betting companies have more information to measure the probabilities of an event occurring than bettors themselves. They are able to analyze the movement of the lines of a given market, being able to measure the feeling of the players involved in that bet, having the whole panorama of the situation at their disposal. The bettor, aside from rare cases, has less data and information to base himself on, and the available ones are often not of enough quality.

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Following this line of comparison, we will take the opportunity to explain why in the first paragraph we mentioned that this asymmetry does not only affects you, but also the market as a whole. To help you have the best possible choice, there are professionals offering their services in all sectors, whether for the purchase of a car, property or the best bets of the day. In any of these segments there are all kinds of quality of the specialists, and low-quality professionals end up, in a general scenario, placing great uncertainty in selecting and trusting the good professionals available, whether they want it or not, even the “experts” who sell a weak service have the advantage of dominating the subject more, compared to those who seek and hire this help.
 
In betting, more and more tipsters appear, who are people who offer this information and tips, pointing out the best opportunities to bet. In the search for these valuable tips, customers (bettors) who have no knowledge end up easily believing that they are receiving information that will give them possibilities of advantage over others. In a market that grows more and more like the betting one, an evaluation record of these “specialists” would be essential to maintain the balance and an acceptable level of information offered, since the idea is to reduce the adverse selection of this operation as much as possible.
 
Thus, we saw that a negotiation in the financial market, regardless of which segment it is, and sports betting, have very similar examples, requiring that there is maximum preparation and competence so as not to be at a disadvantage. A question that arises, in the case of the betting market, is why do people enter into a “negotiation”, since they are probably the weak link, comparing both parties. The explanations of experts for this case are the natural actions that every human being commits, such as irrationality and overconfidence. In addition, there are profitable bettors, just as there are examples of big profits and losing bets everywhere, and that is enough for people to accept entering this market without measuring their advantage or chance of winning in a professional way.
 
In an ideal world, a good betting specialist should reduce this asymmetry, but, as we have seen, in many cases things do not happen that way, because as in any economic sector, there is every kind of level of ability and integrity. That is why it is important to question and delve into the probabilities offered, to understand whether there is value, as thousands of bettors are willing to sell these possibilities, and it is up to you to read all this “negotiation”.

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